Wednesday, January 16, 2002

Consumers defy predictions

Plunge in retail sales doesn't happen

The Associated Press

        WASHINGTON — Consumers, defying predictions that they would turn into Scrooges, spent on clothes, electronics and home furnishings in December and prevented the sharp drop in retail sales that many analysts were forecasting.

        The Commerce Department reported Tuesday that sales at the nation's retailers dipped by 0.1 percent in December from the previous month, a much better showing than the 1.4 percent decline many economists were predicting. In November, sales fell by a steep 3 percent.

        “We went into the holiday season thinking sales could be disastrous. In fact, consumers held up fairly well,” said Carl Tannenbaum, chief economist with LaSalle Bank/ABN AMRO. “People are feeling more confident in the economy and they are expressing that with their dollars.”

        Consumer confidence, as measured by the Conference Board, rebounded strongly in December after three months of steep declines.

        Retail sales last month were pulled down by a 4.2 percent drop in sales at gasoline stations, reflecting lower prices at the pump. Sales at sporting goods and building — supply stores also declined.

        But sales for many other items — including clothing, home furnishings, electronics and appliances, and health and beauty products — posted solid gains in December. So did sales at bars and restaurants.

        Sales of cars edged down by 0.1 percent last month as free-financing deals and other incentives waned. But the decline was smaller than many analysts expected and marked an improvement over the 10.3 percent plunge seen in November.

        Excluding automobile and gasoline sales, overall retail sales rose a respectable 0.3 percent in December, economists said.

        “Consumers aren't buckling,” economist Clifford Waldman of Waldman Associates said. “They are spending selectively.”

        For all of 2001, retail sales rose by 3.4 percent. While that was a big moderation from the 7.6 percent increase in 2000, it showed that consumer spending didn't collapse. Still, the 3.4 percent increase was the weakest showing since the government began tracking retail sales using the current classification system in 1993.


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